Berberian's Blog

Crazy Airport in Paridise

Well after a 5 days of rain - we had 2 days of sun. Yesterday we got a treat and visited the tower at the St. Bart's airport. It's an incredible airfield where airplanes have to make their approach between two mountains, land at a steep angle, and stop the plane in less than 650m or end up on the beach. The beach BTW is beautiful and there is no fence between the departure end of the runway and sunbathers. During peak season - 200 aircraft arrive/depart from this tiny airfield. Check out the video of a crash that happened in 2009.

Beach Meets Runway

Notice Yellow Buoys to Show Where Not to Swim in case of a Crash

Can't Beat a Bad Market

I’m at my favorite vacation spot in the Caribbean and it’s raining - a lot. Which isn’t all bad - it’s allowing Renee and I to get caught up on stuff and just be with each other.

It is also a good time for me to reflect on the past several months. Since September 2009 I’ve been with Zettasun - a solar panel startup that has some very special optical technology that allows a fixed panel to track and concentrate the sun as it moves across the sky.

My job as CEO (Cash Extraction Officer) is to raise money to build our panel - we did a few rounds of angel money to develop 4 prototype panels and we now need a real Series A. So for the last 8 months I’ve been out telling our story. Here is a list of who we talked to in order of what felt most logical:

• VCs who should invest (they’ve done other supporting type deals, they have enough money to support multiple rounds, they understand our sub-sector of the solar market, and they invest in early stage companies)
• VCs that could invest but their fund size might not be a perfect fit
• VCs that have competitive companies in their portfolio, new to cleantech/solar or are non-believers in the technology
• Strategic companies that want to support the cleantech space like contract manufacturers and material suppliers
• Foreign investors in Saudi Arabia, UAE, China, Jordan, Israel, Singapore, Taiwan and Canada
• Private equity/hedge fund guys
• Family funds / Indian tribal funds - but not really hard
• Armenian mob (not really - but close, we looked to go public on the pink sheets)

Well over 30 face-to-face meetings and over 100 in total.

I’ve always believed that if you have a great team and great technology you’d be able to raise money regardless of the market conditions. I now have a different opinion. The solar market has been soured by several high profile deals that after billions invested are still not showing a profit. On top of that, the price points that everyone thought they had to hit in terms of manufacturing costs continue to drop as a flood of cheap silicon panels from China hit the market. It has become the ole “catch a falling knife story.” When we met with potential investors - they all showed genuine interest - but they were preoccupied with their previous deals - much of the new money going into solar in 2009 and 2010 are either inside rounds or for much later stage companies.

Perhaps it is the team or the technology or the stage of our development, whatever the reason the cash did not come in when we needed it. So we made a very deliberate choice - we chose to stop engineering efforts and preserve the intellectual property of the company. We spent the entire month of April documenting everything we could to allow a restart and buttoning up our patent applications. We also left enough money in the bank to see the patents through issuance and allow some business development to continue.

In the end I never got to actually run or build anything - I spent 85% of my time fundraising and redoing presentations. I actually think we were late for fundraising and a bit early with our technology. If we were raising money in 2007 - I suspect we would be funded. Our technology, however, is most likely early for the market - the entire supply chain for our type of panel is still very immature. In a few years, it will either develop and our technology will be even more compelling or it will go away and the notion of concentrating PV will become the HD DVD of the solar sector.

So now I transition from CEO to investor/board member and the founders are keeping the patents alive while looking for a new investor or partner to restart the business when the time is right.

I really wish it all came together - but sometimes the market headwinds are working against you - great team, great technology - bad market. In this case, the right decision seems to just wait for the world to change.

Open Angel Forum Colorado

Last night I had the honor of presenting at the Open Angel Forum Colorado. OAF was created by Jason Calcanis in response to the ever increasing practice of making startups pay to present their business plans to potential investors. Makes total sense - the startups have no money -why should they pay to pitch. I've been asked numerous times to participate in such programs, ranging from €8,000 to pitch in Monte Carlo at the Clean Energy Summit to $15,000 to pitch at the Private Equity Forum in NYC. Now I'm not saying these are bad gigs - who wouldn't love to go to Monaco - but it doesn't feel like a good use of time or money. Think about it - between airfare and hotel - the cost to make one 20 minute pitch could be a month of burn for a lot of startups.

If the event is really worth it - the process will be competitive - the organizers will stake their reputation on the quality of event - and the presenting companies will get the needed exposure to the right type of investors. That's what happened last night.

Happy to be a part of it - just one word of advise to future presenters - don't switch computers for your pitch - use the one they have (I tried the switch and the projector vomited on my MacBook - which really is not a great way to make a first impression. Live and learn.)

Great job David and Jason - thanks for putting this together and thank you sponsors.

An Open Letter to My Mom Regarding Why the Hell I Can’t Get Free Money From the Government

Dear Mom:

First off - I love you - thanks for the call last night during the President’s State of the Union Address. Yes - you are right - there is a lot of money going to green companies. No - I don’t have any yet. Yes - I know I should try to get some. Yes - I heard Obama say he is going to create green jobs. Yes - our company makes solar panels; we have green jobs. No - we don’t have money from the government. Yes - I think we should apply. Mom I heard you loud and clear - I understand - you think we should get millions from the government - BUT PLEASE LET ME EXPLAIN.

The government is not giving away money to create green jobs to just anyone. The government is flowing money into new and existing programs that will distribute some of it according to their rules and ability. A lot of it will be eaten up by earmarks where a company lobbies their congressman to say - we want $10M of that DOE program.

OK the rules go like this Mom - if the government gives you money - you need to have money first - in most cases. It is called matching. So if they give you a million dollars you need to match it with a million dollars. Sometimes they just give you money but that is usually through a University or some national lab - we don’t fall into that category. Let me repeat - we need the matching funds.

The government doesn’t have the ability to manage thousands of little investments - they are not a VC. So they give out a few small grants to a handful of companies then they give HUGE grants and loan guarantees to more established companies that can hire 1000 people overnight - like a Dow Chemical or Ford. They want jobs now - not a bunch of technology startups. A company that can hire 50 folks to install Chinese solar panels on roofs in Colorado is more likely to get funding than us because they can hire 50 folks. We can only hire 2 more engineers to help develop our technology to cut solar panel costs in half; but because we are a year or two away from building a factory - we can get no money today from those job creation programs.

We need to get money from R&D programs which have their own rules and politics. Typically you can’t get big money until you’ve gotten a little money first and proven you can handle it. So we applied for $150K - 30 page application for $150K with a detailed budget! So did 300 other jokers. Only 10 got it (4 of the 10 winners had an affiliation with MIT BTW). That process from applying to notification took 6 months. We have to reapply again for $150K - if we get it, then in another 6 to 12 months we can apply for one to three million. Only a four companies got $3M in this recent round.

Also Mom it takes time. If you apply for a grant it takes months before you get the money at best - which doesn’t work for us - our business moves too fast. We need money now. Government money isn’t predictable - you can’t run your business on grants - it is simply in addition to whatever you already raised. It shows up like a lottery ticket or a check from an aunt that remembered your birthday for some reason. Since you can’t bank on it - you simply apply and forget.

But mom I really don’t want the government to be a VC. I’d rather they incent the VCs to make more investments in clean-tech. Or better yet implement policy that puts some sort of price on carbon emissions - that way green energy won’t cost such a premium - it can stand on its own merit.

Mom you know me - if there is a way for me to legitimately milk the system to get something for free I will. We will keep applying for everything that makes sense - but spending 5 days on an application for $150K is bogus. Our government green investment strategy is short-sighted - jobs now. To build a real clean-tech economy we need smart policy not just cash for short lived programs and manual labor jobs. The government R&D funding process is broken too - better to just give all the money to universities and national labs - let the private sector choose which companies will be the winners and losers.

I know it sounds like we should get money in the press - but the reality is the money isn’t for startups - it is for the well funded or more established companies.

OK I got to go.

Love - Paul

My Incredibly Talented Wife

This past August Renee decided to go back to school - she enrolled at the Colorado Film School. As a new student she decided to dive right in and take 4 classes - one was Short Script Screen Writing and the other was Production One. Production One is all about learning the basics of film making - how to use a camera, lighting, different jobs on the set, sound - a broad overview of the process but nothing super advanced. The students learn by hands on exercises - the culmination of the course is the creation of a 5 minute short.

Last night the entire school got together at the Harkins theater in Northfield to view the best films of the summer and fall semesters from all the students - the Academy Awards for the school. The place was packed - standing room only and hundreds of films were submitted by close to a thousand students - only a handful were selected for viewing. Renee's was one of the few that made it to the big screen.

What really impressed me about the entire program was every single film from the first years to the 16mm cinematographer film makers was of extremely high quality from an artistic and storytelling standpoint. The bar was very high. For a first year student, just being selected for this event is an honor. To actually win an award is even better. Renee actually won Best Film for Production One - she also was nominated for best film overall and best writing.

Congratulations Renee - amazing talent - all of the long hours and sleepless nights plus suffering through my complaining about how you're going overboard on your homework have paid off. Good thing you didn't listen to me.

Here is her film:

Picking a Business

Last week I spoke at CU for the New Venture Challenge (NVC). The NVC is a campus wide business plan competition for students and faculty. Members of the local community can also participate so long as one active team member has a current CU ID.

Since the program is just starting, my topic was "Picking a Business Worth Starting". I spoke for about an hour - here is the video of the event.

10 Differences Between Cleantech and Tech Industries

It has been 6 weeks since I started at Zettasun (fka DecaSun - as promised we changed the name). Here are some of my observations about the differences between the Cleantech industry as compared to the Tech space.

1. The JQ (joker quotient) is higher than tech. The world is full of jokers. It seems when it comes to saving the planet they all tend to flock to this industry.
2. Business skills are optional in Cleantech.
3. If you have a PhD - you can raise money. You can raise lots more money if you come from Stanford or MIT.
4. Having a practical idea is of seemingly little value. Using materials in your products that come from meteors seems to make total sense.
5. Boiling the ocean is possible - you just need enough parabolic mirrors and a billion dollars - then you can run a giant steam generator.
6. The government is willing to help you build your business - so long as you don’t need their help - otherwise they won’t help you.
7. We have national labs to evaluate our ideas - unfortunately they don’t have the “this makes sense” test.
8. We have a Grid. Tech has the Internet. In Tech the Internet grew and became better as the market expanded - in Cleantech we’re jamming our electrons into someone else's old and decrepit network causing all kinds of problems. It’s like your cousin backing up a Uhaul to come live with you - he’s family so you can’t say no, but you really don’t want all his shit in your house.
9. Cleantech products weigh more than Tech products.
10. We don’t have to deal with language translations - our stuff works everywhere.

My New Company

Today I officially became the CEO of Decasun LLC.

Decasun is a solar panel company. More specifically we are a HCPV solar company that is making standard sized rooftop panels that can do two axis tracking with no external moving parts and mount just like normal panels. Which means nothing to you if you don’t follow solar panel technologies, however, just remember we make an extremely efficient panel, that is easy to install, at a very low price which = super cheap electricity.

Now some may ask why join a business in a field that is seemingly very crowded and overfunded? My answer, “It works.” I see the technology working in the sun everyday. The founders and engineers just get it - they come from the hard drive industry and understand how to design products for low cost and high performance. And the problems we are solving are not fundamental science questions but rather manageable mechanical design and manufacturing issues. Decasun is not reinventing the wheel - we are cleverly assembling parts differently than the other guys and layering in our novel optical designs (our secret sauce). The demand for cheap electricity will never go away - so if we deliver on price and performance - the market will be there.

Well day one is over. Great first day - fantastic team - funky offices - lots of stuff to learn and tons of fun. I even got to meet with some potential investors.

Oh and those who know me know - the name will probably change:)

Glad I'm Taking the Photo

After three years without a piano - we finally got one today - Marlo (my daughter) is happy.

Selling Stuff I Don't Have - and Failing

I keep doing this because it feels good. I sell stuff I don’t have. I just sold a very very large company some technology we didn’t have.

While it’s technically correct we didn’t have the goods - I had the reasonable belief that we could develop and ship it in a short amount of time.

Engineers hate sales guys who sell stuff they don’t have. We had that all the time at Raindance - Todd Vernon would complain, “Why don’t they just sell the shit we have” and I’d reply, “Dude you’re gonna go there - build it.” I’m certain he is experiencing that right now as CEO of Lijit.

As a CEO I love selling stuff I don’t have - it does 3 things for the company:

1 - Drives momentum - nothing like a waiting customer to get your team cranking
2 - Focuses your efforts - you quickly have a tool to help you prioritize your work
3 - Creates a definable win for the company - getting something new into a customer’s hand is a great, concrete milestone that the company can celebrate

When you sell beyond your capabilities it stretches your company and hopefully makes it grow. If it goes wrong it is usually from over estimating your team's ability to deliver or over estimating the value of the customer.

Over estimating your team is risky business. If you put them in a position to deliver and they fail, you demoralize them and send the company backwards. I just did that - but I'm OK with it. Sometimes you need to show your team what it takes to win. Taking a high-school football team and pitting them against an NFL team will certainly give them a few bruises but teach them the lesson of what it takes to play at the professional level. In business there is no minor leagues - you either are able to play with the big boys or you will forever limit your growth. You can’t push your team to failure that often - but sometimes it happens. And frankly you should never give them a task you simply know they can’t do. In this recent case I knew the folks have more than enough talent to get the job done and I didn’t expect them to fail, but I did know I was asking for a level of performance that they haven’t demonstrated in the past.

In the case of over estimating the value of the customer, that can also negatively impact your team. Nothing upsets an engineer more than developing something that no one uses. While they initially feel good they built the product they can quickly get the sense that their work was of no value. This happens all the time and it is helpful to be able to iterate quickly on products and features so the team doesn’t focus on the last thing no one used. By keeping a fast pace in the business and building a culture of delivery no one will put too much stock in their past accomplishments - it will always be about the future. Also giving the team the broader picture of the business will help them understand that some things will be hits and others flops - but in the end the breadth of the offering will grow. And customers do lie - they may say something is important but it’s not - they may be doing a feature comparison and you just need to check a box.

As a CEO you need to make sure that when you sell stuff not on the product sheet you are using a tool to advance the business into a new market or attract a new class of customers. If you get too schizoid or allow everyone to sell stuff you don’t have, it will most likely backfire and defocus the company. In fact this is probably the most common way to defocus a business - someone sells something he doesn’t have.